Labour has a splendid solution. It's Clause IV

DURING the last war Randolph Churchill, Evelyn Waugh and the second Lord Birkenhead were marooned in Yugoslavia. Finding Churchill's boisterous company increasingly intolerable, Waugh and Birkenhead offered a bet that he would not read the Bible from start to finish. Churchill accepted. Some way through the Old Testament, he said: "This book is extremely well- written. Why has it not been drawn to my attention before?"

On re-reading Clause IV of the Labour Party constitution, I feel much the same. It proclaims the party's aim as:

"To secure for the workers by hand or by brain the full fruits of their industry, and the most equitable distribution thereof that may be possible, upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry and service."

It became part of the constitution in 1918. It was written by Sidney Webb, assisted by Arthur Henderson. It was intended to appeal, not to the trade unions or the middle-class intellectuals, but to the lower middle- class element in the party, City clerks and the like, such as Malcolm Muggeridge's father. In 1929 "workers" replaced "producers" and "distribution and exchange" were added. Beatrice Webb had nothing to do with the original or the revised version. In her diary for 30 June 1918 she wrote:

"The Labour conference has come and gone in the full limelight . . . a magnificent staging of the new people's party claiming its right to control international affairs."

There was no mention of Clause IV, which evidently did not preoccupy Mrs Webb. The people who took it up were the Conservatives, particularly after 1945. Labour's nationalisation measures were mostly unpopular. The exception was the National Health Service, which was extremely popular, as it remains. Indeed, if Mr Tony Blair promised to restore it, he would be sure of sweeping the country. But coal, gas, electricity and the railways were differently organised. They were run by bodies known as "Morrisonian public corporations", after Herbert Morrison's London Passenger Transport Board of 1933.

Ministers could lay down broad policy but not, in theory, interfere with day-to-day running. In practice they interfered all the time. They were shy of giving those formal directions for which the nationalisation Acts provided. Instead they preferred to go about their business in a more English manner: through hints, nudges, discreet pressure, occasionally shameless bullying. Invariably interventions were political. At some times, for electoral reasons, prices had to be kept artificially low; at others, under pressure from the Treasury, forced upwards. The electricity industry was used to subsidise coal. Corporations were forced to "buy British" when they did not want to.

It may be that the whole conception of the public corporation was wrong. Aneurin Bevan certainly thought so. He believed that nationalised industries should be run not by a board but by a minister directly responsible to Parliament: in much the same way as, until recently, the Post Office was administered by the Postmaster-General. What is certain is that public corporations were never allowed to operate as had originally been intended.

After 1979 the Conservatives began dismantling them and replacing them with private monopolies. The privatisation pro-gramme, the biggest piece of public plunder since the Dissolution of the Monasteries, came about largely by accident. When it proved popular, Lady Thatcher's governments expanded its scope. Mr John Major's government is doing the same, with its crazed privatisation of British Rail. But we should be clear about the reason why the original privatisations were as well liked as they proved to be.

It had nothing to do with increased competition, for there was none, except in telephones. Nor was it a consequence of any desire by the populace at large to become shareholders, in the sense of persons owning an appreciating asset over a number of years. It had everything to do with making a quick profit. Conservative governments found themselves in the happy position of being able to give away money. By initially undervaluing the shares, they could guarantee a rapid appreciation and, hence, a secure profit. These sums were usually of the order of a few hundred pounds: not much, but enough to gratify the feckless proletariat who voted so enthusiastically for Lady Thatcher.

Last week it all went wrong. Following a ruling - if ruling it was - by the electricity regulator that prices had to come down, the latest instalment of electricity privatisation proved something of a frost. Share prices went down instead of up. This was never meant to happen. It was not only the greedy Thatcherites who were angry. The big institutions were none too pleased either.

With its unfailing aptitude for grasping the wrong end of any stick that may be lying around, the People's Party took the side of the pension funds and the share-purchasing Thatcherites. Its representative, Dr Jack Cunningham, instead of saying "Serve them right", absurdly accused the Government of "insider trading". At Question Time Mr Blair pursued much the same unprincipled course.

For the real question is not whether a regulator, in this case Professor Stephen Littlechild, spoke out of turn, so lowering the value of shares, and, if he did, what was the state of the Government's knowledge. The question is whether bizarre creatures such as Professor Littlechild - or Dr Ian Byatt with water, Mr Don Cruickshank with telecommunications and Ms Clare Spottiswoode with gas - should exist at all; to say nothing of the "franchisers" who are now laying the railways satisfactorily to waste. Is there not a case, in fact, for turning the clock back, and reverting to some form of public ownership, in which the salaries of figures such as Mr Cedric Brown would be subject to legitimately public scrutiny?

With gas, electricity, water and the railways, the case is now overwhelming. With telecommunications, it is less so: partly because of the element of genuine competition provided by Mercury, and connectedly because of the improved service provided by BT (which is not at all apparent with gas, electricity and water, still less with the railways). When you suggest that industries might be renationalised, you are met with an embarrassed look. "Think of the cost!" Labour politicians then go on to say. But a government-appointed director and a Treasury-held "golden share" can resolve problems of control at no cost whatever.

Nor did this diffidence about public ownership start with Mr Blair. I well remember being admonished by Mr Charles Clarke (then one of Mr Neil Kinnock's young men) for writing that Labour should promise to renationalise water. This is no time to be abolishing Clause IV. Never has it been more apposite. It is certainly better written than anything that is likely to be put in its place in April.